- REUTERS/Mike Blake
- On Thursday, Amazon announced that its cloud Amazon Web Services generated $8.38 billion in net sales this quarter, up 37% from this time last year.
- This is AWS‘s slowest quarterly growth rate in more than five years.
- This quarter, AWS comprised of more than two-thirds of Amazon’s operating income – but fell short of the $8.5 billion mark that Wall Street had wanted to see.
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The Amazon Web Services cloud business continues to be a major source of growth, as its revenue jumped up 37% from this time last year – Amazon announced on Thursday that AWS did $8.38 billion in its most recent quarter, up from $6.1 billion a year ago.
That’s impressive, but there are reasons for AWS to hold off on popping the champagne: Not only did that revenue figure miss Wall Street targets of $8.5 billion, but it’s also the lowest quarterly growth rate that AWS has shown in more than 5 years.
That being said, Amazon senior vice president and CFO Brian Olsavsky said on the earnings call that AWS saw a year-over-year growth in run rate from $24 billion to $33 billion. He says that $9 billion increase is second only to the fourth quarter of last year in Amazon’s history.
“We’re seeing a pick up from customers and their usage, their increased pace of enterprise migration, increased adoption of our services, especially our machine learning services,” Olsavsky said on the call. “And continually, again, AWS is being chosen as a partner to many companies because of our leadership position both in technology, our vibrant partner ecosystem and also the stronger security that we offer.”
The previous quarter, AWS jumped 42% year-over-year in net sales, which was itself down from 45% in the quarter before. That makes this the second quarter in a row where AWS saw a slowdown in sales growth. Since the first quarter of 2017, AWS had grown at an annual clip of between 40 and 50%. This was the first quarter since at least 2013 that AWS grew at an annual rate of less than 40%.
It’s not immediately clear what caused this relative slowdown, but it’s entirely possible that it’s simply because AWS, which leads the cloud computing market, is so big that it’s hard to keep up that pace of aggressive growth.
Still, AWS comprised of more than two-thirds of the company’s operating income in the quarter, reflecting the massive size of the business.
Overall, Amazon’s profit this quarter and projected operating income for next quarter was shy of Wall Street’s expectations.
In comparison, Google Cloud announced Thursday that it was on an $8 billion annual revenue run rate, a measure of the revenue it expects to generate over the next year if current conditions hold steady.
For its part, Microsoft said at its own earnings last week that its cloud Azure grew 64% from the previous year, although it did not break out specific revenue numbers. However, it did say that its Commercial Cloud revenue, which cuts across product likes like Office 365 and the Azure cloud, was $11 billion in its most recent quarter.